Aeolus launches research into earthquake sequences with RED

Aeolus Capital Management Ltd., the Bermuda based reinsurance and insurance-linked securities (ILS) investment fund manager, has announced a new research partnership with natural disaster focused risk analytics firm RED – Risk Engineering + Development, in which implications of earthquake sequences will be explored.

Aeolus Capital Management explained that the research project will involve a quantitative study looking at how a key aspect of earthquake risk, sequences, is represented in currently available catastrophe risk models.

The research will be led by Aeolus’ own Dr. Pete Dailey, Head of Research, who is a recognised expert in catastrophe model development and analytics.

Dr. Dailey explained the focus of the earthquake research and its importance, “Aeolus Research is excited to launch this partnership with Prof. Bazzurro and the RED team based in Pavia, Italy.

“Earthquakes naturally occur in sequences, some persisting for weeks, months or even years. While catastrophe models have considered temporal clustering of earthquakes explicitly in their models for regions like the New Madrid zone in the central US, recent occurrences of sequences in New Zealand, Italy and Turkey have provided additional data for the scientific community to analyze.

“The partnership with the RED team will ensure our proprietary risk models continue to account for earthquake risk in a complete and holistic way.”

Prof. Bazzurro of RED is a recognised expert in earthquake risk modeling, and was previously the Head of AIR Worldwide’s (now Verisk Analytics’) earthquake risk modeling team.

Prof. Bazzurro stated, “This is an important study into the effects of including sequences into earthquake risk estimates in California.

“We look forward to our partnership with Aeolus to help improve our understanding of earthquake risk.”

For an investment manager like Aeolus, understanding the implications of how sequences could affect earthquake risk in a peak zone such as California can provide useful insights, to assist in the management and tailoring of portfolios, as well as in the pricing of contracts.

Aeolus is well-known for its research focus, having previously launched an initiative focused on hurricane prediction, looking at the medium-term time horizon, alongside the State University of New York (SUNY) at Albany Department of Atmospheric and Environmental Sciences.